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They have already inserted so-called “poison pill” provisions into the North American trade framework (USMCA) in 2020 with Mexico and Canada, targeting the PRC. Just a week ago, similar clauses were added to trade agreements with Malaysia and Cambodia. This will not end here, and the PRC should think (and act) about how to respond to these increasingly aggressive moves by the United States to constrain its foreign trade space and infringe upon the trade sovereignty of nations around the world for its malicious hegemonic intents.
A follow up from this post. The PRC should act because it will not stop with Malaysia, Cambodia, Canada and Mexico.
Explainer | Why is China alarmed by the new US-Malaysia trade deal? Poison-pill provisions explained
Controversial wording seen as a geopolitical trap designed to force neutral countries to uphold Western containment strategies
China has expressed “serious concerns” regarding a trade agreement signed last month between Malaysia and the United States, and some analysts suggest it might be related to how the pact could force the Southeast Asian nation to align with Washington’s sanctions regime.
The official reaction on Thursday followed a meeting between Chinese and Malaysian commerce officials earlier in the week. While Beijing did not publicly specify the offending clauses, critics point to provisions that ostensibly limit Malaysia’s ability to pursue independent trade deals.
Here is why the agreement, which seeks “to strengthen their commercial relationship through increased alignment on national and regional economic security matters”, may be raising hackles in Beijing and Kuala Lumpur.
What triggered Beijing’s concern?
At the heart of the dispute are provisions that critics argue compel Malaysia to pick a side in the geopolitical rivalry. Analysts point to Article 5.3, which allows the US to reimpose higher tariffs if Malaysia strikes a trade deal with any nation deemed to jeopardise essential US interests.
“China isn’t mentioned explicitly, so there remains a level of ambiguity – in theory it could be referring to other countries such as Russia or Iran,” said Lynn Song, chief economist for Greater China at Dutch investment bank ING. Such a clause appears to be an attempt to pressure countries into “choosing a side”, which is likely why it has drawn concern from China, Song noted.
What is the ‘alignment’ clause?
The deal also includes Article 5.1, which obliges Malaysia to mirror US trade restrictions on third countries – including tariffs, quotas, prohibitions and other charges – reiterating the pact’s desire to “address a shared economic or national security concern”. Stephen Olson, a former US trade negotiator who is now a visiting senior fellow at Singapore’s , while pointing out that the text avoids naming specific targets, said it was clearly aimed primarily at Beijing. “If Malaysia fully implements what these provisions seemingly require, it would have to replicate any restrictive policies that the US puts in place against China,” Olson said, warning that this could have severe economic ramifications, depending on the policies in play. And from Beijing’s strategic perspective, it could also raise concerns that Washington is having some success in aligning countries against China, Olson noted.
How has Malaysia reacted?
The trade agreement has sparked fierce debate in Kuala Lumpur over sovereignty. Opposition politician Mohamed Azmin Ali slammed the pact as a “one-sided deal”, arguing that Malaysia was giving away too much control over its economy, the New Straits Times reported late last month.
“If Washington decides to block imports from China or Russia, Malaysia must do the same, even if it harms our economy,” Ali was quoted as saying by the local media organisation. The former minister of trade and industry said that Article 5.1 was particularly damaging, arguing that it “forces Malaysia to take sides in other people’s conflicts and destroys the neutrality that has long been our strength”.
But current Trade Minister Tengku Zafrul Aziz dismissed those fears on Thursday, insisting that the pact brings broader economic benefits and does not compromise ties with Beijing, the New Straits Times reported. “This is not a geopolitical pact. It is a trade agreement,” he said. “We continue to maintain robust access to other markets through the , the and the .”
What is China’s official stance?
The Ministry of Commerce has urged Malaysia to weigh its long-term interests. In a statement on Thursday, while the ministry welcomed Malaysia’s dispute-resolution efforts with other countries, it said that the resulting agreements “should not damage global trade development and regional cooperation, nor should they harm the interests of China”. According to the ministry, Malaysia offered a point-by-point explanation during this week’s meeting of commerce officials, reaffirming its desire to deepen bilateral economic cooperation with China.
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